Top 10 Alternatives to accomplish the Long term investment goals
To propel in the direction of long time investment zone, you can first have the glimpse of Compounding. You might be familiar with the fact, how compounding and Long term investment are interconnected. Let me elaborate to convey the same in an easier way.
Generally we know, Compounding is equalized as addition of interest to the principal sum of deposit. No one can seek financial goals overnight, one needs to have patience to eventually reach the investment goal. That would be ascertained and can be acquired over a period of time. This can be also be understood with the help of the popular saying of Warren Buffett.
“Someone is sitting in the shade today because someone planted a tree a long time ago.”
Practicing the compounding technique can be beneficial for you:
- In order to reap positive returns in the future, one must understand the advantages that may take place after certain period of time. If you invest today or able to reinvest dividend at around 4% can create a good difference when you retire from your occupation.
- Buying stocks for the long term lets you experience the compounding and its effects. Your ability to put your profits/outcome over time to produce even higher returns decides, how well you know the power of compounding. For an instance, if simply keeping a 4% yield will double your money in around 40 years, you may assume that as a phase of no dividend or stock price growth. If that value would be reinvested again into more stocks of the same type, that investment potential would be twice of the earlier value in even lesser number of years!
- The aspects presented here, are mainly to give a brief of Top 10 ways, you may use to accomplish the financial goals. Investment for long time can be a good option to serve the following purposes: Education, Purchasing an asset, Marriage or some other financial goals in your mind right now .
We know, you must have the basic idea of where to invest. But, you can also explore here to know it better. To attain the long time investment goals, Top 10 ways are:
Take the example of ULIP(Unit linked insurance plan), it is a life insurance product that provides risk cover for the policy holder and also avails investment options to invest in various market segments such as bonds, stocks, or mutual funds. In the single combined plan, one can utilize investment part and the security part according to desired situations. Keep in mind, that Insurance and investment both plays substantial part in building a long term investment plan.
In short, the Life cover may help your family in the future with satisfactory financial support in your absence, if any mishap occurs. As the nominee of the same, will get a lump sum amount to secure the future. Insurance provides financial security to you or your family while investment is to raise your capital.
For a long time, gold has been chosen as the best physical asset to invest in. It depends on you whether you invest in gold for a long time or short period it’s definite that, you will receive some returns. The gold prices may have sudden increase or all eventually. Moreover, it’s an asset with zero counter party risk. You can also put money on this segment in the form of Gold ETFs, Gold Deposit Scheme, Gold Mutual funds etc. Also, gold has been a popular investment option since very long time. Subsequently, it is handy too and presents better results.
Real Estate Is Almost Risk-Free and safe zone to invest in. The uncertainty of returns, sometimes, as seen in stocks is hardly seen in this sector. Trading in stocks and derivatives is risky at intervals and needs skills to trade wisely to avoid big losses. The possession of real state asset ensures the consistent monthly outcome that may also rise over a period of time, as the property rates vary(this well known investment option is structured to grow at nearly 30% over the next decade and makes this sector a good secondary income source for a long run. Your property might appreciate quickly or it may take years, but the real state sector is worth considering for long time investment goals.
The traders who pursue trading for short time or suppose they invest for 1 year time or even less, they come under the category of tax payers who pay taxes at their top marginal tax rate. That may lie between the range of 10% to 39.6%. Normally, if trader has invested for the longer duration than above, they would be at profit as taxes may exist as 0%, 15%, or 20% at the highest or it depends on your income. In simple words, you’ll pay lesser taxes than before.
So here, what we are intended to say is, holding the stocks/shares for more than a year saves you money as per the tax applicable may vary depending on time span.
Post Office Saving Schemes (POSS):
As, it is a government scheme, chances of the risk involved are least. Post Office Schemes are good for long term financial goals and has guaranteed returns as the substantial output over a certain period of time. You will find very less difference in banks and post office regarding short-term deposits. The difference is seen at large scale with the long time. As, SBI provides 6.5 % on three-year deposits, while post office rate is 7.3% for it. And if we consider five-year FD plan, SBI offers 6.5 %and the post office rate is 7.8 per cent. Two of the influencing Post Office Saving Schemes are Post Office Monthly Income Scheme (POMIS) and National Saving Certificates (NSC).The Post Office Schemes are best suited to those investors, who do not want to face any risk in investing and are fine with the normal or not so high return potential.
Public Provident Fund or PPF:
PPF is a well known long term investment option active in India since ages. It is stated as one of the safest and most tax efficient tools. Being backed with government organizations, the risk factor with this becomes zero. The investment in this segment may produce appropriate amount at maturity. You may get the advantage in the form of a fixed annual rate of return. The PPF account can be easily opened in the bank or a Post office as per your choice. Some catchy benefits that make investing in a public provident fund more useful are flexibility of deposit, Tax-efficiency, returns etc. Other, important feature says that the account is easily transferable between post offices or banks.Here, in long term, you can earn interest on interest. The outcome gained can be used during the time of retirement/ child education etc. It is also considered as the best debt investment instrument available in India.
Mutual fund is managed professionally, it is the investment fund that is comprised of investments in shares/stocks/securities by numerous investors. Mutual funds has caused traction to various traders/investors across the India and the market segment is quite popular for many years. The diversification it holds, as you can invest in debt funds, gold funds or equity funds as per your choice is also the factor, that grab the attention and interests you in this area.The whole process is managed by Asset Management Companies or AMCs that are regulated by SEBI (Securities and Exchange Board of India).
National Pension Scheme (NPS):
NPS is a scheme approved and regulated by Pension Fund Regulatory And Development Authority (PRDA). The investment here in NPS generally focuses on making a retirement corpus. You can be a part of it from an early age of 18 years and upto 65 years. The scheme allows the scheme holders to contribute on the regular basis during working life and withdraw the returns on retirement. It is compulsory for central and state government employees while in case of private employees or for general public, it is optional.
This is one of the top 5 long-term investment plans. An equity share, is an ordinary share. Longer the time, more is the return of such long-term investment plans. The equity shareholders get benefit as yearly dividend or with appreciation in the value of their initial investment. In this market investment, the liability of equity shareholders is limited to the extent of their investment. These investments are quite popular in a joint stock company.
Life Insurance Policies
You should understand the vital role of Life insurance policy. Being one of the inevitable part of person’s financial planning, it provides security and serves as the wealth supporter. It is a long-term investment and come into play depending on the need/situation of the life stage. That may include the child education, loan protection or saving for retirement. It is a influencing financial product. In this, policy holder pays premium for a certain number of years and if any mishap regarding death or disability occurs, the financial needs of family of the policy holder are taken into consideration and cared by the insurance company which pays the agreed life cover amount. Some of the advantages are wealth creation, regular savings, and tax-savings including the feature of life coverage, which take ahead the financial security of your loved ones in your absence.
Some other ways:
The combining of the shares of selected PSUs nominated for disinvestment under a single fund (forms the base of Exchange Traded Fund) and further the integrated shares are sub-divided into an individual units/shares. The value of one unit (or ETF unit/share) depends upon prices of underlying PSU shares. These units can be listed in the stock exchange as ETF and can be traded like ordinary stocks/shares.
Although, the ETFs are similar as the mutual funds. The contradictory point is that ETFs can be traded any time when the market is open, just as in case of stock. Gold ETF is an important instrument in the NSE.
A bond is a kind of loan taken out by companies/organization. Investors give money to the company, when it buys their bonds. Further, the company pays the annual interest rate payable on a bond at a decided time span. (Annually or semiannually) and returns the principal on the maturity date, by ultimately ending the loan.
The interest paying bonds can be a good option for a long term investing. As here, Bondholders are considered as the creditors of the issuer means the one holding the bond will give money as an interest to the issuer.